Many HSBC swiss account holders may escape income-tax net

Those Swiss bank account holders who could play the staring out game with tax officials over the past three years may end up having the last laugh.

More than half of the 600-odd suspected with Swiss accounts with HSBC Geneva are hoping to slip out of the net as the period of timebarred assessment by the tax department ends on March 31, 2014.

Under the circumstances, the tax office, said two senior accountants and a department official, will have to pass orders based on "available information" that may not be adequate to nail them. "Since the information is based on stolen data, the assessees strongly believe the orders will not be strong enough to be upheld in subsequent appeals. This will place them at an advantage, even though it's an open secret that these individuals had parked money abroad and continued to be beneficiaries of overseas bank accounts which were never disclosed," said one of the persons familiar with the cases.

In a large number of cases, the scrutiny notices were served by the Income Tax department during the financial year 2011-12; in the same year, the department carried out raids and search operations of their residences. Unless the department can fish out more information from the Swiss authorities — who are yet to share any concrete evidence that can be used to back up the charges — the time-bound assessment period for these individuals comes to a close by the end of the month.

"The department can delay the order (beyond March 31) if it claims that it is awaiting materials from the Swiss government under the exchange of information agreement. But since the Swiss government has been so far unwilling to share information, many assesses are keeping their fingers that the matter may gradually go into cold storage after some weeks," said a source.

Also, things could slow down post elections and with the formation of a new government. "The cases have been pursued so far because of Mr Chidambaram. Things may not be the same once there is a new government and a new finance minister. At least, this may not be an immediate priority. We don't know whether the next government will chase the cases or prefer to come out with an amnesty scheme," said the person.

As things appear, a small number of HSBC account holders who had accepted the allegations and agreed to ada and Australia. In a report published on December 2, 2013, ET had reported that tax professionals believe that the stolen nature of the data could act as an obstacle under the new information-sharing protocol signed by Switzerland. There is a lobby in Switzerland that feels information should not be shared with countries that deal with stolen data.

Till now, despite the department's best efforts, neither HSBC nor most of it clients have shared copies of bank documents like account opening form, statements, identity or KYC proofs like passport copies with the tax department. A year ago, the department persuaded some of the accountholders to sign a paper authorising HSBC to part with all relevant documents pertaining to their respective accounts. But most accountholders had succeeded in dodging the tax department. And in instances where consent was given by the accountholders, it's understood that HSBC (with the help of a third party) had couriered the documents to accountholders and not to the Indian tax department.

"The data pertains to deposit amounts at earlier points of time. Since then, most had moved money either out of Switzerland to banks in Dubai and Singapore or to other banks in Europe," said a source aware of some of the transactions. sugata.ghosh@timesgroup.com pay tax on undisclosed would be the losers. These individuals may have to deal with penalty and even prosecution proceedings.

In the absence of fresh evidence from the Swiss, most accountholders and their advisors are counting on the stigma attached to 'stolen data'. Five years ago, the French employee of HSBC Geneva had obtained the information through unauthorised means before the data found its way to the French government in 2008-09. "The tax department knows the pitfalls. In fact, in 2011, the French tax office had a setback after a French court ruled that stolen document was an unlawful and inadequate evidence for conducting raids," said a person practising tax laws.

In June 2011, France had handed over data on Swiss bank accounts to countries like India, the US, UK, Canada and Australia. In a report published on December 2, 2013, ET had reported that tax professionals believe that the stolen nature of the data could act as an obstacle under the new information-sharing protocol signed by Switzerland. There is a lobby in Switzerland that feels information should not be shared with countries that deal with stolen data.

Till now, despite the department's best efforts, neither HSBC nor most of it clients have shared copies of bank documents like account opening form, statements, identity or KYC proofs like passport copies with the tax department. A year ago, the department persuaded some of the accountholders to sign a paper authorising HSBC to part with all relevant documents pertaining to their respective accounts. But most accountholders had succeeded in dodging the tax department. And in instances where consent was given by the accountholders, it's understood that HSBC (with the help of a third party) had couriered the documents to accountholders and not to the Indian tax department.

"The data pertains to deposit amounts at earlier points of time. Since then, most had moved money either out of Switzerland to banks in Dubai and Singapore or to other banks in Europe," said a source aware of some of the transactions.

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Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.